Comment So was nine months of relentless iPhone hype and froth just a distraction? Not quite, but you could be forgiven for thinking so. I believe Apple's most important product of 2007 was actually announced this week, and its significance has been slow to sink in. It might be one of the cleverest moves Apple's ever made.

The 'Jesus Phone' today looks like it was really 'John the Baptist'.

Apple's iPod Touch: sod the Music Store - you can browse on this thing!

I hope Apple has ordered enough parts, because the iPod Touch is going to be a sensation - at least for one Christmas shopping season, if not more. Not only does the Touch bring Apple's big gimmick breakthrough, its capacitive multi-touch interface, to its key music products, it does so at a very low entry point: $299 (or £199). That, rather than $499, is the market sweetspot.

But the whizzy interface is simply a means to an end. Because the Touch has Wi-Fi, so you get the most attractive web browsing device at a very low cost, too.

And as a bonus, the importance of which few pundits or bloggers have realised yet, Apple stealthily enters a new market altogether: the connected PDA. This 'Second Box' business is one that almost everyone has neglected, because they've followed the conventional wisdom that Everything Must Be Converged. But what if that isn't true?

Unlike the iPhone, which is locked down at the carrier's request, third-party applications will not be restricted on the Touch. All it's lacking is Bluetooth - which was apparently in early specifications, but didn't make it into version 1.0 - and removable storage.

In short, the Touch brings much of the value proposition of the iPhone to people who are perfectly happy with the phone they've got - or who are locked into a long contract with a network operator. All along, I've pegged the iPhone as a defensive move disguised as an offensive strategy. If Apple hadn't introduced a phone, it would be marked down for imminent death at the hands of the mobile phone companies - Sony Ericsson does music very nicely indeed.

My, how that script is going to need a rewrite, after this week...

Perhaps the clues were there all along. iSuppli pegged the bill of materials for the iPhone at just over $200, giving Apple a profit margin of over 50 per cent. That suggested Apple could put much of the technology in a much lower-priced device, which it's gone and done.

As we can now see, Apple has fulfilled its primary responsibility to its shareholders: to strengthen and extend the appeal of its most successful product line, the iPod.

Next page: Build A Second Box, and they'll come